New study shows ObamaCare subsidies potentially five times higher in first year than predicted

posted at 3:13 pm on October 21, 2010 by Ed Morrissey

In passing ObamaCare, Democrats argued that it would provide a net relief to the budget deficit in its balance of new taxes and fees, drastic cuts to Medicare Advantage, and the subsidies it would provide to Americans making $88,000 a year or less. A new study commissioned by Families USA, a group that supports ObamaCare, shows that the Democrats and the CBO badly miscalculated the level of subsidies provided. In the first year (2014), 28 million Americans would have eligibility for more than $110 billion, outstripping the Congressional/CBO estimate by almost 600%:

Families USA commissioned The Lewin Group to use its economic models to estimate how many individuals would benefit from the new premium tax credits in 2014 and the value of the dollars going to help pay for insurance (see the Methodology on page 12 for more details). We found that an estimated 28.6 million Americans will be eligible for the tax credits in 2014, and that the total value of the tax credits that year will be $110.1 billion.

The new tax credits will provide much-needed assistance to insured individuals and families who struggle harder each year to pay rising premiums, as well as to uninsured individuals and families who need help purchasing coverage that otherwise would be completely out of reach financially. Most of the families who will be eligible for the tax credits will be employed, many for small businesses, and will have incomes between two and four times poverty (between $44,100 and $88,200 for a family of four based on 2010 poverty guidelines). However, because the size of the tax credits will be determined on a sliding scale based on income, those with the lowest incomes will receive the largest tax credit, which will ensure that the assistance is targeted to those who need it the most.

That conflicts with the final CBO estimate that Barack Obama and Congressional Democrats used to argue for ObamaCare. In his presentation to Congress, CBO director Douglas Elmendorf predicted a cost of only $20 billion on health-exchange subsidies and associated costs. The Lewin Group, which conducted the study for Families USA, shows that four times as many people will become eligible for subsidies in 2014 than the CBO predicted in March and that the cost will be 550% higher as a result (page 4 of the linked study):

 Nationally, approximately 28.6 million Americans will be eligible for these new premium tax credits in 2014 (see Table 1).

 People in working families—those with annual incomes at or above 200 percent of the federal poverty level ($44,100 for a family of four in 2010)—will constitute nearly twothirds(65.6 percent) of the people who will be eligible for a premium tax credit (seeTable 1a).

Morgen at Verum Serum discovered the wide discrepancy and notes that the study wasn’t intended to argue against ObamaCare:

The Lewin Group study was commissioned by Families USA, a healthcare reform advocacy group based out of Washington D.C. which is closely allied with the White House and leading Democrats in Congress. Then Senator Obama was a keynote speaker at their annual Health Action conference in 2005 and 2007, and House Speaker Nancy Pelosi opened the 2008 event. Other leading Democrats who have participated at Families USA events in recent years include Hillary Clinton, John Kerry, and Ted Kennedy.

The study appears to be the centerpiece of a major media campaign initiated last month by Families USA to promote the benefits of the health reform legislation. A September 14 press release touts the projected $110 billion in federal subsidies as “one of the largest middle-income tax cuts in history”, but makes no mention of the discrepancy with the CBO’s earlier estimate.

Families USA also published state-by-state estimates by the Lewin Group of the number of people eligible to receive these subsidies and the associated costs. Numerous local media outlets around the country have reported on these figures over the past few weeks.

The CBO’s projection that the healthcare reform bill would reduce the deficit by an estimated $143 billion over 10 years was a critical factor in the enactment of the bill. Democrats lost their super-majority in the Senate in January 2010 when Scott Brown was elected in Massachusetts, and ultimately passed the bill in March only through the use of procedural tactics, and without a single Republican vote in the House or Senate.

The claim that the bill will reduce the deficit continues to be a leading selling point for proponents of reform. Just last month Families USA repeated this claim in a press release criticizing opponents of the legislation. But if the latest Lewin Group estimate is correct the initial 10-year cost of the bill will be significantly higher than what was forecast by the CBO, and would begin adding to the federal deficit as early as 2015.

Morgen also contacted Families USA to get an explanation of the difference, and was told that he made an “apples to oranges” comparison. Why? This survey, they explained, showed how many people would be eligible, while the CBO predicted how many people would actually take advantage of their eligibility for tax credits. This is an odd distinction to make, since the entire idea of the subsidies is to encourage uninsured Americans to buy health insurance through both mandates and generous subsidies. How likely will it be that people will pass on the notion of getting big tax credits to subsidize must-issue health insurance? And if the success rate in applying mandates, higher taxes, and more government authority to the 270 million Americans who are already insured is only 20-25% in getting the other 30 million insured, how is that at all successful?

The deficit projection given by Democrats was apparently based on 75% failure rates to get people into the system; their advocates are busy touting the massive amounts of subsidies in the program that will tip ObamaCare into a deficit exploder in Year 2. Either way this goes, it’s a massive failure.

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Critics of Obamacare reasoned against it on that very premise. It is financially insupportable. Even WITH 5X higher subsidies, it will require another 5X and 10X higher subsidies. The nature of the federal bureaucracy beast.

So the subsidies will be $110 billion in 2014, and we can assume they will increase from then until 2020, but even if they remained constant, that’s $770 billion by 2014, instead of $20 billion per year ($140 billion total) projected by the CBO.

The difference is $630 billion in “unexpected” costs, which must be added to the deficit, so instead of a deficit reduction of -$143 billion, we end up with a deficit INCREASE of $487 billion, IN ADDITION to reduction in Medicare funding.

What a big boondoggle failure pushed by failed people who have utterly no concept of what the hell they are doing. Outside of not being economists, they are neither doctors, nor administrators, nor accurate prognosticators, nor skilled in the arts of planning medical services for individuals, nor populations of people–despite these failings, they’re a group of excellent leaders, let me tell you that right now…/

A September 14 press release touts the projected $110 billion in federal subsidies as “one of the largest middle-income tax cuts in history”

It is so annoying how people (especially Leftists, it seems) interchange the terms “tax cut” and “tax credit.” They are not the same and it’s imperative that every American understand the differences.
Just read that press release. The organization uses the terms interchangeably. Are they being deceptive, or what?
visions on October 21, 2010 at 3:26 PM

Don’t ask trick questions :-)

Of course they were being deceptive and lying – it’s what Leftists do.
It’s the only way they can sell their Marxist agenda.

If people knew that Obamacare and the rest of it would run this country over a cliff, no one would go for it – except maybe the left for some inexplicable reason.

a major media campaign initiated last month by Families USA to promote the benefits of the health reform legislation

I’ve seen those Andy Griffith commercials, but I don’t recall him saying that one of the “benefits” of the legislation was that it will bankrupt the nation much more quickly than anticipated. But maybe he’s saving that tidbit for version 2.0 of his commercial.

Everyone involved with shoving this travesty down Americans’ throats should hang their heads in shame — and that includes you, Sheriff Andy.

1. All employers have to offer health coverage.
2. If you don’t have a job, the govt will give you $X per month to buy insurance
3. If you’re self-employed, you get a $X tax credit per family member that can be applied towards buying insurance.

A 3 page bill that would actually do what the proponents claim O-care will do…..insure everyone at a reasonable cost.

Americans by and larget don’t understand anything to do with taxation or govt spending. 80% can’t tell you the difference between the deficit and the debt. Even the MSM often interchanges the two.

Lots of people think that if they get a tax refund in April, it means they pay no taxes. Which is why Obama could get away with saying a change in the deductions every paycheck meant a tax cut. People see an extra $20 per paycheck and think they are paying less taxes. Never mind that it’s the final tax liability at the end of the year that matters, now how it’s broken up over pay periods.

Americans just aren’t very smart. And so they don’t understand, which allows charlatans like Obama to lie endlessly.

Here’s a piece on Ron Pollack and Families USA. I was there at this propaganda meeting at Kirkwood BAPTIST Church in Kirkwood, MO. I wrote the pastor a note telling him I was shocked he would allow such a left leaning group in his church. No reply. Guess the Baptists have joined the social justice movement.

What a mess. The dems have really done it this time. I predicted there would not be another liberal president for 30 years after Jimmy Carter and I was right.

Barring any cheating like amnesty, I predict it will be another 30 years after Obama too.

The liberals just don’t understand America. They think and think and think, but as a circle of light increases, so does the area of darkness around it. That is why dems are in the dark when it comes to human nature and reality.

What a mess. The dems have really done it this time. I predicted there would not be another liberal president for 30 years after Jimmy Carter and I was right. Barring any cheating like amnesty, I predict it will be another 30 years after Obama too.

The liberals just don’t understand America. They think and think and think, but as a circle of light increases, so does the area of darkness around it. That is why dems are in the dark when it comes to human nature and reality.

saiga on October 21, 2010 at 5:14 PM

Yep, seems every generation has to learn the painful lesson of progressivism/socialism. Re Iran, we are still dealing with the mess Carter left us, how long will it take us to recover from the Jackass?

An estimated 6 out of 10 kids in SCHIP had private insurance coverage but dropped it to get into the heavily subsidized government program which, in some states, costs a whopping 35 dollars a year even if family incomes are in the $40,000 range.

Next up, the whole population drops private insurance, and then wants it back when it learns, the hard way, that coverage is not the same as care.